Contract of Employment in Sri Lanka: A Contract like Any Other, But a Contract Not like Any Other!

Abstract

Contract of employment is a contract relating to employer and employee relationship. The traditional common law considered it as a contract made with free will of the parties. It paved the way for exploitation of employees by their employers because of the unequal bargaining power between the parties. The 'welfare' character of the State has made the State to intervene into the contractual relationship between employers and employees to protect the interests of the employees. The interventions made by the State to redress the unequal bargaining power between the parties have eroded the sanctity of 'contract' in a contract of employment. The objective of this paper is to discuss the extent to which the State has intervened to redress the unequal bargaining power between the parties in a contract of employment, and the effects of those interventions. For the purpose of this research, the provisions of the labour legislation, decided cases and books have been analyzed. The findings show that the State intervention to protect the interests of employees has led to enactment of multitude of labour legislation. The labour legislation provides the terms and conditions of employment, establishes labour courts with just and equitable jurisdiction, promotes collective bargaining and gives legal effect to collective agreements. The provisions of the labour legislation form skeleton to a contract of employment as most of the matters relating to terms and conditions of employment are governed by these legislation. The matters that are not covered by the legislation could become terms of a contract of employment. However, these terms also would be tested in the touchstone of 'just and equitable' by the labour courts. The labour courts have power to create contracts in the absence of formal contracts, create new rights and obligations between parties and disregard unfair contractual terms to award just and equitable reliefs. As the Industrial Disputes Act gives legal effect to collective agreements, collective agreements also override the contracts of employment. These interventions and the consequent developments have replaced the traditional common law contracts of employment with just and equitable contracts of employment. Hence, it could be argued that a contract of employment is a contract like any other, but a contract not like any other!